Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach
AbstractWe use a sample of 18 countries to study what variables have a significant impact on an individual's decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one's belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an "inside view" of their situation, overestimate their likelihood of success, and, as a result, rely significantly on perceptions rather than on objective expectations of success.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 465.
Length: 26, 3 p.
Date of creation: 2005
Date of revision:
CARTs; Entrepreneurship; Overconfidence; Self-employment;
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